An extremist, not a fanatic

January 10, 2007

Diversity & innovation

Steve Sailer is one of the best bloggers around. But I'm not sure he's right here:

I suspect that it's more likely that ethnic diversity stifles
innovative thinking by making political correctness more mandatory to
keep the peace.

There is, however, some evidence from company performance which suggests that diversity can have beneficial consequences. This paper says:

After controlling for size, industry, and
other corporate governance measures, we find significant positive
relationships between the fraction of women or minorities on the board
and firm value.

Diversity, it seems, is associated with some sort of superior performance - be it outright innovation, creative thinking, less bad management or a willingness to see talent wherever it exists. Whatever it is, this is evidence against the view that diversity necessarily stifles good thinking.This, however, just deepens the question Steve raises. Why is it that Britain had far more great creative intellectuals 150 years ago than it has today?

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Well, 150 years ago, Britain was the centre of a great Empire. That means that there was an influx of intellectual resources into the centre, which raised the level of debate and creativity. The United States is where this kind of effect is observed in recent years.

Note: even if the "great intellectuals" are not immigrants (although some are) they benefit from being in a place where intellectuals from abroad gather.

Some other little factors:

1) Being the economic centre of the world propelled the engineering exploits of people like Brunel.

2) Inequality can produce greater innovation, because it creates a "leisure class." Many of the great characters listed lived largely in this leisure class. They didn't work for a living, per se. They explore a hobby of literature or science.

3) There are historical eras to these things. 150 years ago was the flowering of the Industrial Revolution. This spawned a mass of discovery and "first time attempts" in science and engineering. It's only natural that you can find a bunch of heroes from this time.

4) Literature is a funny one. It's hard to ignore the idea that the centre of Empires tend to spawn some good literature. It was true for Rome, Tokyo, Paris, etc. Explaining this one takes blog post, not just a comment.

Did it have more great creative intellectuals 10 years ago or are we just looking back with the benefit of hindsight? It's not exactly unusual for genius to be unrecognised at the time. And if by 150 years ago you mean "1857", can we certainly say that in 1857 there were more great creative intellectuals than there are in 2007? Or are you talking about a particular span of time?

"After controlling for size, industry, and other corporate governance measures, we find significant positive relationships between the fraction of women or minorities on the board and firm value."

Maybe boards that consist only of white men find it easier to collude to raise their salaries at the expense of returns to shareholders. Alternatively, I scanned there regression variable, and it hardly seems they have captured the span of good governance practices. Diversity may just be a proxy variable for excluded measures of good governance.

For example, we usually want governance to require that equity and voting rights be aligned and that directors be elected by majority voting. Hell, Institutional Shareholder Services assigns a governance score to many companies, they could use that.

"After controlling for size, industry, and other corporate governance measures, we find significant positive relationships between the fraction of women or minorities on the board and firm value."

Large corporations are more likely to have 'diversity strategies' in place. They have more to lose if they're accused of racism/sexism/whatever, and a few different faces in the boardroom provide some insurance. And in the UK, companies which do a lot of Government or Local Authority work find that it doesn't hurt either.

In the US people like Jesse Jackson have mounted campaigns against lots of companies.

I would have thought that on pretty much any measure, the level of British creative intellectuals operating today is far higher than 150 years ago.

The main difference is that 150 years ago, creative intellectual skills only had the obvious outlets of writing, art, politics and academia.

Now, there is a huge demand for creative intellectual skills across all kinds of different industries, many of which are less obvious (because a movie incorporates dozens of creative intellectuals who are seldom known by name; an investment bank hundreds; and so on...)

I completely agree with Katherine's point.
To claim that humanity, the west, or just the UK were more creative 150 years ago than now is absolutely ludicrous.
I'm sure you can find some narrow field of specialization (maybe the writing of boring and pointless anglican sermons, or the composing of kickass hymns) in which more and better work was being done 150 years ago, but taken across the whole of society, get real.
Literature, music, archeology, biology, physics; we're living in the greatest freaking golden age of all time. The inanities of our politicians and the stupidities of many of our fads don't change that.
And plenty of the good work is being done by Brits. I can't give a long list of names for the simple reason that I don't store things that way in my brain, but you certainly see Brits referenced when reading say anything about modern biology (Sydney Brenner did his nematode work in Britain as an obvious example) or archeology (Colin Renfrew certainly sounds British).
As a rough guess, I'd say the Brit team is weaker in engineering; on the other hand that's probably not a field you had in mind when you made your complaint; and it may not even be true - I remember listening to a talk a few months ago on Brit involvement in some unlikely field like organic semiconductors or bendable LEDs or suchlike, the kind of thing you'd expect to be the exclusive domain of American universities and Asian manufacturers.

I can see that a natural diversity of picking the best people for particular jobs might help, but I've worked in places with compulsory "diversity training", promotion policies which nakedly favoured properly diverse minorities over people with actual competence at their work, and the like, and I find it hard to believe that it produced anything other than bile and jealousy.

You seem to crop up quite a lot in comment boxes with one-line unsupported assertions of your own cliched brand of individualism.

Everyone thinks you're a bit of troll. I'd stop it if I were you.

On the post in hand, I agree that diversity is a real asset as outlined in this post. And while diversity works, diversity policies probably don't.

Personal networks are important here. If you went to a posh public school and only do business with other similars who went to a similar PPS, then you are not likely to have your thinking or methods challenged.

And you won't be able to supply your customers with something that is particularly differentiated from the offerings of your rivals.

Or at least this would be the case if we had fewer cultural monopolies than we do.

It is, IMHO, very good business practice to get out there and meet as many different people in different settings as possible.

Not my place to say, since it's not my blog, but I'm kinda "with Paulie" on this. And I'm rather enjoying emulating AntiCitizenOne's endlessly fascinating use of inverted commas.

Seriously AC1, you see a study like this and just seem to produce a oneline statement of your own prejudice. Do you actually have any source for your stated opinion, like, say, a study?

I mean, it couldn't possibly be that a company successfully utilising the talents and abilities of a large proportion of the population could be more successful than a company using a small proportion? No, that would be far too logical.

No, it must be that big successful companies are dragging dead weight and getting away with it because they are very successful. Yeah, that makes sense.

"I mean, it couldn't possibly be that a company successfully utilising the talents and abilities of a large proportion of the population could be more successful than a company using a small proportion?"

If a large proportion of talent is focused in a narrow area then a company that rationally discriminates will be vastly more succesful than one that recruits for token purposes.

The whole problem is that people seem to want to force people to recruit from areas that do not make business sense to the business owners. I would state that "diversity" is a luxury item that only rich companies (and government entites that are extortion funded) can afford.

I speak from my own experience rather than any study. You merely don't like what I type and want to ban it.

Boards of Directors are for show. If you look at the CEO job, which is where the real power is, it turns out that 99% of the CEOs of Fortune 500 firms in the US are white. So, there isn't yet a large enough sample size of non-white run big companies to even do a statistical study.

That kind of white domination remains true across a lot of extremely elite jobs -- e.g., 94% of Hollywood studio movies are written by whites.

I'm not sure what it all means, but one thing it suggests is that the people clawing their way to the top are largely white, that they don't view minorities as much competition compared to other whites, and that they publicly "celebrate diversity" to one-up themselves over the other whites who are their main competition.

Where on earth did I say I wanted to ban you AC1? Please try to answerthis question, rather than a different one you think I have asked. Where did I say I wanted to ban you?

And since when did anecdotal experience become reliable evidence?

And you'll note that a company being "diverse" does not mean that it has been forced to recruit for token purposes. That, it appears, is just your assumption. Based on, what, the idea that non-white, non-males are entirely incapable of having skills that are worthwhile to a successful company?

"Literature, music, archeology, biology, physics; we're living in the greatest freaking golden age of all time"

How so ? All the scientific and cultural progress on which modern life depends is driven by technology and culture that was born at least 100 years ago - Electricity, the telephone, internal combustion engine, jet engine, printing press, musical instruments, democracy, theory of realtivity etc. have all been around for 100+ years
Where are the great inventions of the diverse post modern age ? The only ones I can think of are concrete and the internet, both invented by white european males.
There is no independent evidence to show that diversity has any benefits either at the level of a commercial enterprise or in wider society.
The reason is that diversity is only beneficial where it consists of desirable (creative, intelligent, talented, law abiding, tax paying) people. But exactly the same argument can be used to support the opposite of diversity - uniformity.
There is no logical reason why someone from a non-white ethnic background should be more creative (whatever that means) than anyone else. If anything it's a racist stereotype.
It's just wishfull thinking to say "the modern age is diverse and the modern age is good, therefore diversity is good".
The idea that an "undiverse" workforce is missing out on talent is just cobblers. The cream always rises to the top and business got along just fine before anyone even knew how to spell diversity and equality. If business really is/was missing out on super talented and efficient women then it obviously hasn't affected their bottom line.